Okay, welcome to week 6 with ethics. You might be asking yourself, well, how does this fit into supplier management? I'm going to go through some ethical issues that you need to be aware of. Almost all of these in one shape form or fashion involves the supplier, but also involves how you act internally with the supplier. So let's go ahead and get started. Can you name some ethical issues that have hurt an individual procurement person or company? And maybe you were aware of something that happened in your company or maybe you've seen something in the paper or maybe a particular procurement person went to jail or something. Just jot them down on a piece of paper, I'll give you about 30 seconds. And we're going to go through six of these unethical behaviors, so you'll understand them. See you in 30. Okay, so let's get started. So again, I'm going to go through these six of the tier, but there are others and there's a reading that is assigned by the Institute of Supply management covers many many other ones. I thought these were the major ones to discuss, but if you want, you can learn a lot more about it when you read the ISM paper on procurement ethics. So let's start going through these six. So the first one is reciprocity, and this is when you're giving preferential to a supplier who is also a customer, right? And this is a tricky one because sometimes it can be restraint of trade, and there are some legitimate formats criteria to be evaluated by a supplier's capability. So this happens very frequently in a bank. So the bank is buying things from the supplier, but the same time, not purposely, but the sales people are trying to sell bank services to the individual company. So I think what you need to do is be very transparent. And I think, a friend of mine said in the banking industry, they actually have a committee that reviews these things. And they want to make sure they're making the right procurement decision and communicating a process properly to all suppliers, so they feel there's a fair and just way they're looking at it. If it gets to the point where you're not picking the right suppliers, let's say that are higher priced or something, you better have a darn good reason why you're doing it. So this is reciprocity, this is the first one. Second one, personal buying. In some companies, this is true, more so, when I first started in procurement, I don't see it much anymore. But sometimes, people come to you and say could you buy this for me, get me a good deal. And there are a couple of exceptions, but I would tell you that I would say it's something you really don't want to do. So, hopefully, you got a policy covering. You might say well, what are some of the exceptions? Well, maybe you're working in a warehouse and the warehouse people have to buy their own shoes. So the company allows you to buy the shoes for them at a cheaper price or under contract, but the employee has to pay for it. That's a pretty easy one to understand. But there are other things, maybe there's private clubs in the business that they have a some sort of men and women's club that they want you to buy the materials for but it's really separately from the business. So, my advice would be, it's not that I'm not recommending it, but just say no and unless you have people higher up telling you that you have some rules you want to try to understand. Accepting supplier favors. This is when people get gifts and gratuities. This is a pretty common one that happens in particularly, not so much anymore, but does still happen to this day. I'll give you a couple examples. And the point with the word about is that, are these gifts showing appreciation trying to influence you? Well, sales people probably are thinking that, right? And basically, in a bare minimum, it really, It speaks to the thing about people have credibility issues with you. So let me just give you a couple of examples. So one is one place I worked, I won't mention any names, a guy was working in the plan and all the procurement people were gone. And he found out through the grapevine that they all were playing golf of the supplier. He called me up, and of course when they got back, I read him the Riot Act and said you can't do this, right? First of all, it looks like the supplier is trying to influence you, but more importantly, you're not at work. So it's a double issue in that respect. So it's something that you want to do. Another one would be when I worked in a one particular company. I happen to be working all over the Christmas holidays doing annual reviews, nobody is in the office and a supplier had delivered huge, huge boxes of gift packs. So, I was only one in, so I call the supplier, say this is unacceptable, and he said well, we do it all the people. So we end up sending suppliers back to a third party that was delivering the gift packs. But it was a funny story once he said you're the only one that's ever asked me to take these back. And of course, we had to write the supplier level a letter saying don't do this again, etc. So this is a big one, and most policy is outlined. There's no gifts or favors, but you ought to be aware of it. Sharp practices is when you kind of use some misinformation to get results. Maybe exaggerating the problem, maybe you're actually for example, asking for bids from an unqualified supplier just to try to get the way to negotiate your preferred supplier down. Basically, it's basically gaining information unfairly through deception. You really don't want to do this. Number one, it's just isn't ethically right thing to do. And number two, if people see you do it, they really have to wonder about these practices. You want to be having an open honest discussion with suppliers about the facts. You don't want to be using this information. You might in this particular case, have a couple of examples, you might share information on competitive quotations. You'd never want to do that, that's a private confidential number from other people. Another one is that they find out at the last minute that they go to issue the contract, and they tell the supplier at the very end when they're going to hand them a contract, by the way, we don't pay for dyes and plates. Well, that's not fair, right? You want to tell people up front that that's the case, so had to build it into their price, don't surprise them at the very end. Taking advantage of a supplier's situation such as, you know that they're weak financially, so you try to have to do it and certainly lying in misleading the company is not the right thing to do. Financial conflict of interest. This is when you're very worried about having any direct interest in any of your suppliers, all right? So what typically would happen to me in Colgate once a year, myself and my senior staff would come in, they'd have to sign a legal document that I believe. I don't know the exact number, but something like, you didn't own more than 5% of this particular company's stock. Even if it's in your IRA, you're probably only got a couple percentages. So you want to make sure you don't want to tell if you have any type of interest, either perceived or real. And then you certainly don't want to be involved in any Insider trading, buying and selling, you've read about that in the paper. Personal conflict of interest, right? So this would be things like, you find out that the, this actually happened, it was in Colgate. We are doing a bid to do the cleaning contract for a site in New Jersey, and at the very end, we found out that one of the bidders was a guy's wife, wasn't in procurement or somewhere else. So again, you it's really, you don't want to deal with those types of things. We had to say thank you very much for working on this, but because you're relative to somebody in the business, even if it's you're being upfront, giving a reasonable bid, it's going to look very unethical. So you want to have key disclosures and openness in these types of things. So how do you support ethical behaviors? Well, there's a couple of things. First and foremost, most companies today have some sort of procurement policy and procedures manual. It's very common, we had it a Colgate, it was on the web, you could read it. People were issued it in the department, very, very common. And it can also be sometimes outside or maybe from senior management, is issuing these policies or re-affirming it. They're good to review every once in a while, just to make sure you got everything in there. Showing a top management commitment that this is serious stuff, and the senior manager of the company really wants to support having ethical behavior. We had training, I was responsible in Colgate to do once a quarter training, an ethical training that included not just procurement, but other activities, but procurement is always a big piece of that. You want to develop a consistent behavior for everybody. We had a way to internally report anything, we had a 1-800 type of thing at Colgate that if anybody, anybody in the world had a problem that they had thought somebody. For example, who's taking a bribe or whatever, they could call anonymously the 800 number and we would send out a team. Sometimes I was advised about it, sometimes I wasn't. But whatever it would be, they would handle it through this 800 number and senior management would do what's necessary. And they would brief me after the fact if it did occur. Didn't occur very often, but it did occur. And you really want to do some preventive measures, one tactic you can do is you can just rotate people, so they're not dealing with the same supplier over and over again. That can be good and also have issues with it from a knowledge standpoint, but at least that way, you get different people and you know that you're being very ethical in dealing with that situation. So what are some of the key takeaways here? I think to be successful in procurement, you got to follow your company's policies and procedures and guidelines, right? And if you don't, you're going to find that you can ruin your company reputation, right? And you've seen a couple of these things in the paper where the procurement people will unfortunately undertake or whatever, and of course, it comes back not only on the individual ruins his career, but it also ruins the company's reputation, which you know is very important. And then lastly, whether you like it or not, if you like it or not, in procurement, while other things may be occurring in the business, you're going to probably be held to a higher standard and you want to make sure that whatever you do, you make it very visible, such as those Christmas gifts. I made it very visible to everybody that was in the thing, that we're sending these things back. I talked to the people that got the boxes. I talked to the supplier. I wrote a letter. I talked to the distributor. We made it very, very clear that we will not tolerate this and we're going to hold ourselves to a very high ethical standard. So with that it, that's it for ethics and we're going to be moving on to supply market analysis in course six.